Fed Rate Cuts Cause Sell-Off Frenzy: Why Is Crypto Down Today

What Does Fed Interest Rate Decision Mean for the Future of Crypto?

Fed Set to Cut Rates Again: What It Means for Bitcoin and the Crypto Market

On December 18, Jerome Powell, the Chair of the US Federal Reserve, is set to announce the latest monetary policy at 12:30 AM IST. While markets widely expect a 25 basis point (bps) rate reduction, lowering the federal funds rate to a target range of 4.25% to 4.5%, concerns are growing over a possible hawkish tone. This could signal a slower pace of monetary easing planned for 2025.

This marks a total reduction of one full percentage point since September, as the Fed aims to stimulate economic growth amidst a backdrop of persistent inflationary pressures.

Key Highlights Ahead of the Fed’s Rate Decision

• According to the latest data from the CME FedWatch Tool, there’s a 95.4% chance of a rate cut today, with only a 4.6% probability of maintaining the current rate. 

• This slight drop from yesterday around  98% reflects a slight adjustment in expectations but still indicates a strong likelihood of action.

• The Fed’s decision follows robust job growth in November—227,000 new positions added—exceeding expectations and boosting confidence in the economy’s resilience.

• Inflation remains above the Fed’s 2% target, with November’s CPI rising by 2.7% year-over-year, signaling the need for cautious monetary policy.

Impact on Bitcoin and the Crypto Market 

As the Fed’s decision looms, the cryptocurrency markets are bracing for increased volatility. Bitcoin (BTC) has already seen around a 2.43% drop in the last 24 hours, while market cap stands at around $2.05T. 

• Bitcoin’s recent dip, falling to $103,737 from Tuesday’s peak of $108,250 is particularly notable. This pullback has also affected altcoins, with Ripple (XRP), Solana (SOL), Doge (DOGE), and Binance Coin (BNB) experiencing slight losses.

• Ethereum (ETH) has fallen by around 4.10% in the last 24 hours, with a market cap nears $461.87B. The broader market capitalization for crypto now stands at around $3.36 trillion, reflecting around a 2.58% decline over the past day. This is largely due to anticipation of the Fed’s rate decision and its potential impact on liquidity and interest rates.

Future Outlook for Crypto Investors

As investors wait for the Fed’s announcement, the cryptocurrency market’s response will be critical in understanding how monetary policy affects digital assets. Senior economist Jacob Channel from LendingTree suggests that while a 25-basis-point cut is likely today, further rate reductions in the immediate future are less certain, especially given potential shifts in economic policies under President-elect Donald Trump.